The Chemotherapy Drug Industry

The National Institutes of Health estimated the overall costs of cancer in 2010 at $263.8 billion, of which $102.8 billion was for direct medical costs (total of all health expenditures), $20.9 billion for loss of productivity due to illness and $140.1 billion for cost of lost productivity due to premature death. By 2017, direct medical costs had risen to an estimated 147.3 billion. One industry analyst put the size of the global chemotherapy market at $97 billion in 2017. The analysis group EvaluatePharma estimated total oncology sales in 2018 is $123.8 billion (out of a total prescription medicine market of $864 billion).

A report released in 2016 found total spending worldwide on cancer drugs at $107 billion. A disproportionate amount – 45 percent – is spent in the United States. Zion Market Research put the global anti-cancer market at $113 in 2016 and projected a growth rate of 7.4 percent in the near future.

The Journal of the National Cancer Institute estimated in 2011 that the total cost of cancer care in the US will rise to $158 billion in 2020, a 27% increase from 2010, due only to project growth and aging of the population. A less conservative scenario put the cost at $173 billion in 2020.

The McKinsey Cancer Center in Sept 2016 wrote: “The annual global cost of cancer drug spend was $107 billion in 2015, and is expected to be around $160 billion in 2020.” EvaluatePharma in 2019 projected a growth rate in oncology sales of 11.4% to a total of $237 billion by 2024.

The consulting firm EvaluatePharma projects oncology will have “close to 20 percent market share of pharma sales by 2024.”

There is a large range in the cost of individual chemotherapy treatment, as drugs differ significantly in their cost and necessary duration of treatment. The cost of eight weeks of chemotherapy can range from $100 to $30,000 or more. While the drugs can be the largest part of the cost, there are other expenses like hospital charges, travel, cosmetic items, or loss of work.

A report prepared by the actuarial and consulting firm Milliman, using Medstat 2007 data, found that 22% of all cancer cases reported to insurance companies use chemotherapy drugs, and that patients on chemotherapy are four times as expensive to treat as those who are not. Another finding was that the price of chemotherapy treatment fluctuates significantly from year to year as new drugs are introduced. Milliman’s analysis of drug prices from 2003-2007 found annual increases varying from 8% to 19%.

A 2008 study of 306,709 persons aged 65 and older diagnosed with breast, lung, colorectal, or prostate cancer between 1991 and 2002 found that the use of chemotherapy drugs increased markedly during this time. The proportion of lung cancer patients treated with chemotherapy rose from 24% to 35%, while the percentage of women with breast cancer treated with chemotherapy increased from 11% to 24%. Average lung cancer chemotherapy costs were the highest, and increased by $8,173 during that period, while breast cancer chemotherapy costs increased by an average of $6,160 to $12,802 per person, slightly lower than the average colorectal chemotherapy costs.

Growing Industry

McKinsey’s 2016 forecast stated:

“Oncology is a key driver of growth for the pharmaceutical industry. It is expected to account for about 30 percent of its product pipeline and 25 percent of pharmaceutical-industry revenue by 2020.”

A large part of this revenue growth is expected to be due to biopharmaceuticals (biologics) – first introduced in the 1990s and now a large part of the oncology treatment arsenal. Other technologies such as cancer vaccines and antibody delivery systems have the potential to take off.

Sales of cancer drugs in general doubled between 2005 and 2010. The firm Natixis estimates that the industry will grow at 8% per year, and IMS health estimated that they will grow at nearly double the rate of the global pharmaceutical market. IMS predicted a growth rate of 12-15%, due to expensive new treatments, increasing numbers of patents in major markets, as well more people in emerging markets gaining access to modern targeted therapies.

The chemotherapy market contains hundreds of competitors, ranging from large brand name marketers to small niche generic producers, making it very competitive. The company with the largest market share is Sanofi-Aventis, at 33.9% in 2008. It offers a variety of anti-cancer products, including the leading drugs Eloxatin, with reported sales of $2 billion in 2008, and Taxotere, with reported sales of $3 billion that year. Eli Lilly & Company also has a strong presence in the chemotherapy market with Gemzar and Alimta. Schering-Plough, with the popular products Temodar and Caelyx, has an 8.8% market share.

There is a trend in the chemotherapy industry towards the creation of expensive new drugs which target rare cancers. A study published in 2009 noted that more than 90% of anticancer agents approved by the FDA in the last four years cost more than $20,000 for a 12 week course of treatment. Prices for drugs for rare cancers can be very high – Folotyn, approved in 2009 for patients with relapsed or refractory peripheral T-cell lymphoma, sells for $30,000 a month. Joshua Schimmer, an analyst at Leerink Swann, estimated that annual sales of the drug will reach $300 million by 2014.

Other examples expensive new drugs include lenalidomide, for multiple myeloma, at $74,000 a year, or imatinib for chronic myelogenous leukemia, ranging from $29,000 to $57,000 annually. 18 weeks of the cetuximab costs an average of $80,000 and bevacizumab costs $90,000 to treat an average patient.

Forbes described Roche’s Avastin as the “poster-child” for high-priced cancer drugs. Approved in 2004 for the treatment of breast, colon, lung and brain cancer, it costs up to $55,000 a year and had 4.8 billion in sales as of 2009, with Roche forecasting sales of $8 billion by 2012 or 2013.

Schumarry Chao, whose company, SHC & Associates, advises CEOs on prescription drug pricing, said that with patients being forced to pay an increasing percentage of the price of treatment, some companies are abandoning promising anti-cancer drugs rather than devote hundreds of millions of dollars to complete clinical trials, however. A 2006 study estimated the cost of bringing a new cancer drug to market, including preclinical and clinical testing, at approximately $1 billion dollars. Other types of drugs can also offer cheaper alternatives – experts estimate that five years of tamoxifen to treat breast cancer would cost approximately $8,500, compared to $50,000 to $200,000+ for chemotherapy.

Many new cancer drugs which are being created are not considered chemotherapy but ‘targeted’ drugs, which are much more precise, targeting specific molecular switches involved in tumor growth, as opposed to all cells which divide rapidly. These could take market share away from chemotherapy drugs.

In August 2011, a shortage of chemotherapy drugs formed in the US. The shortage was been blamed on federal recalls, problems in the production process, and corporations discontinuing production due to financial reasons, including competition from cheaper generics. 70 drugs were in short supply in 2006, while at the end of 2010 there were 211, according to the University of Utah Drug Information Service.

Prescriptions for oral chemotherapy drugs can be filled through a number of channels – community pharmacies, mail order pharmacies, specialty pharmacies, hospital pharmacies, as part of competitive acquisition programs (CAP) through a physician’s office, or through office based pharmacies, which are legal in a number of states . In the US, cancer doctors are allowed to profit from the sale of chemotherapy drugs, which is not the case with other drugs.